Bonds-to-Maturity Managed Investment Portfolio

Due to the increase in the Bank of Israel’s interest rate, investment opportunities have emerged in the bond market that have not been seen for many years.

The main beneficiaries are savers, who in recent years had to settle for near-zero interest rates, and now can generate a positive return of about 4% in bank deposits for over a year.

Alongside deposits, it is possible to open at a bank, either in addition or instead, a managed investment portfolio under a bonds-to-maturity investment policy. The investment portfolio, managed under this policy, consists solely of corporate bonds of stable companies with a high investment rating and strong cash flow, which may easily service their debt in the coming years.

The advantage of a bonds-to-maturity portfolio over bank deposits is primarily the higher return potential due to the risk premium (additional yield) that corporate bonds pay to investors.

For example, the bond of the Dorsel Company, which is repaid in installments over about 3.5 years, will generate a gross return of 5.35%*.

If the investor holds the bonds until the final and full maturity date and no insolvency event occurs with Dorsel, this will be the return received over the period.

In addition, an investment portfolio allows broad diversification, including to investment channels that provide protection against inflation.

For example, a bond of the OPC Company, which will be repaid in installments over about 3.5 years, will generate for the investor a 3.09% return plus the annual rate of inflation. If the investor holds the bonds until the final and full redemption date and no insolvency event occurs with the OPC Company, this will be the return received over the period. In this way, the investor enjoys a positive real return throughout the entire investment period.

Another advantage of this model is the liquidity available throughout the period. We emphasize that all bonds are traded on the Tel Aviv Stock Exchange, and the investor can rely on their current yield only if they hold them until maturity.

However, if the investor needs cash, it is possible to sell part or all of the holdings during the trading day. This is in contrast to a bank deposit that locks the investor for the entire deposit period, that is, for the duration of the period specified in the deposit terms – a year, two years, or even more.

* The data is accurate as of March 24, 2025.